Years ago, former Gov. Ed Rendell proposed leasing the Pennsylvania Turnpike to a private company. Fortunately it was a bad idea that wasn’t much cheered up and frowned upon.
Now, an even worse idea is taking place in cities across the state: selling Public water and sewage systems for profit companies. It doesn’t take a financial expert to know that this will not end well for consumers. But this has not stopped local governments from going ahead with what could be described as an irresponsible sale of public assets.
In April, state regulators approved the $235 million sale of York County’s public sewer system to Pennsylvania American Water. The deal gave the county a one-time cash flow, but left residents with a profit-driven company guaranteed to siphon off customers’ bills for years to come.
In fact, the deal was designed to buy elected officials time before the public realized what had happened to them. US Water can’t raise rates for three years. But after that rates can increase by about 50%.
In return, York received a one-time windfall of funds intended to close the budget gap, as well as freeing itself from future maintenance of the water system. But short-term gains cause long-term pain for customers. That hasn’t stopped other local municipalities from making a quick buck.
Bucks County is pushing to sell its public sewer system to Aqua Pennsylvania for $1.1 billion. If approved, residents in Bucks County would see their bills jump from an average monthly bill of $48 to $88. But unlike York County, where rates have been frozen for three years, Bucks County residents can expect a rate hike after one year.
» Read more: Consumer advocates sue Aqua PA for overturning Chesko’s sewer system.
In other Pennsylvania cities that sold off their water and sewer systems, the bills are already coming. The five cities where Aqua recently purchased municipal water systems were hit with the following percentage increases in households using 4,000 gallons a month: Limerick City increased by 98 percent; New garden increased 90%; East Norriton increased 73%; Cheltenham increased 69%; and East Bradford rose 47 per cent.
By comparison, residential customers in Philadelphia, where the city owns the water department, pay about half as much as suburban customers for extra water. Companies.
Residents saddled with skyrocketing water and sewer bill hikes can thank Harrisburg lawmakers for for-profit water companies buying local systems. In the year In 2016, the late state representative Robert Godshall sponsored Act 12, which would have allowed for-profit companies to charge customers the fair market value of the system they received instead of the minimum discount. After the measure passed the House and Senate, Governor Tom Wolf signed it into law.
Beyond the massive price hikes, the sale of public assets to for-profit companies raises other red flags. Local municipalities are not required to conduct the sale publicly, which opens the door to backroom negotiations where ratepayers have no input.
More problematic, for-profit utilities are visible to shareholders, have higher borrowing costs than public municipalities, and must pay taxes. That all translates into higher costs for consumers. The sale of for-profit companies also exposes water systems to outages, reduced water quality, and poor customer service, forcing companies to cut costs in order to maximize profits.
» Read more: Proposed $1.1 billion sale of Bucks sewer system to Aqua PA draws crowds at ‘open house’
In other states that sell municipal water and sewer systems, cities have come to hurt. Mooresville, Ind., tried to buy its water system from American Water after residents were upset about the high rate. But the price approved by the court was more than twice what the city was willing to pay. Fort Wayne, Ind., spent 13 years in a protracted legal battle before it was able to buy back its water system from Aqua America.
Local governments should say no to the quick bucks for municipal water and sewer systems. Any money taken up front will result in higher prices and later regrets.
